FOREX-Dollar ticks up, pounds falls from 1-1/2 year high

(New throughout; updates prices, market activity and comments;
new byline, changes dateline, previous LONDON/TOKYO)
By Kate Duguid
NEW YORK, Dec 17 (Reuters) - The U.S. dollar rose modestly
on Tuesday, lifted by a dramatic slide in the pound after
British Prime Minister Boris Johnson put a no-deal exit from the
European Union back on the table.
Britain on Tuesday set a hard deadline of December 2020 to
reach a new trade deal with the EU, trying to pressure Brussels
to move more quickly to seal an accord. Johnson will use his
control of parliament to outlaw any extention of the Brexit
transition period beyond 2020. It was his boldest move since
winning a large majority in last Thursday's election, and it
spooked financial markets. The pound GBP= had fallen 1.23% to $1.317 in North
American trade, and was down 2.55% from Friday when it hit its
highest since May 2018 in the wake of Johnson's electoral
victory.
"Sterling-negative Brexit uncertainty returned to the
forefront," said Joe Manimbo, senior market analyst at Western
Union Business Solutions.
The euro rose against the pound EURGBP= , last up 1.36% to
trade at 0.847 pence, its strength bolstering it against the
U.S. dollar as well EUR= .
"The move appears to be the knee-jerk variety for the euro
as Brexit uncertainty would only complicate Europe's already
challenging economic backdrop. A better test of euro sentiment
arrives Wednesday with the final reading of euro zone inflation
for November which is forecast to go unrevised at a low 1%,
compared to the ECB's near 2% bullseye," said Manimbo.
The dollar index .DXY was slightly higher, up 0.13% to
97.147, driven by the fall in the pound as well as a fall in the
Australian dollar AUD= .
The Aussie fell to a weekly low on Tuesday after the central
bank opened the door to another cut in interest rates as early
as February. The trade-linked currency also weakened as euphoria
from the U.S.-China trade agreement faded. It was last down
0.51% at 0.685 U.S. dollars to the Aussie. The "phase one" trade deal between Washington and Beijing,
announced on Friday after more than 2-1/2 years of volatile
negotiations, will reduce U.S. tariffs on Chinese goods in
exchange for increased Chinese purchases of some U.S. goods.
Fitch ratings agency said the deal eased U.S.-China tensions
but that renewed escalation remains a significant risk, with the
issue of technology posing an obstacle to full resolution.